Andrew Gamble Mrs Thatcher's Bunker: the reshuffle and its consequences

THE RESHUFFLE Relative failure September 14 will long be remembered in British politics. A The failure of the Government on both these counts was illustrated in beleaguered Prime Minister half way through her term of office, her the 1981 budget. The inability to achieve real cuts in the total level of popularity and that of her party at record low levels, her economic public expenditure meant that taxes had to be raised, making taxes strategy in disarray, her party critics vocal in urging a moderation of actually higher than when the Tories came into office. Despite its her policies, with unemployment at three million and the cities still election pledges, its economic strategy, and its ideological principles, smouldering after the recent riots, did not choose the safe option of the Thatcher government after two years in office had managed to changing her policy. Instead she changed her cabinet. She reaffirmed increase both public expenditure and taxation. The most telling sign in unmistakeable terms her commitment to the strategy she has of the Government's failure was its own index, which it had always favoured. She brushed aside all the pressures on her to change introduced to give a better guide to the cost of living because it course. Sir Ian Gilmour, one of the chief victims of her purge, might included tax changes, jumped ahead of the retail price index after the well have quoted one of his own favourite epigrams as he stood on the Budget. On the trade unions the legislation enacted was extremely steps of Downing Street: 'The Government has turned its back on the modest and apart from the steel strike the Government backed away people and now has the effrontery to claim that it has the people at its from confrontation with organised labour. The most significant back.' climbdown was when the miners threatened to strike. The episode tells us much about Thatcher and Thatcherism and The reason for the reverses was partly the practical difficulties of about the new Tory Party that is struggling to be born. There is a long managing the recession and preventing it from turning into an established interpretation of British politics that governments pursue uncontrollable slump, but an important factor as well was radical policies in their first two years of office and are then forced undoubtedly the opposition within the Government to the full partly by electoral pressures and partly by the practical problems of implementation of the social market strategy. The spending ministers governing to move towards consensus policies. The Thatcher foughi very hard to limit the size of the cuts the Treasury ministers government appeared to be following this pattern. Beginning in a were demanding, and they scored some notable victories, particularly blaze of rhetoric and ideological fervour it launched a series of radical during the second round of cuts in 1980. At the Department of policy initiatives inspired by New Right doctrine and the social market Employment, Prior resisted every attempt to toughen anti-union strategy which had been fashioned in opposition. But the execution legislation. The cabinet 'wets' were not so ineffectual as their label was much less impressive than the rhetoric. The Government chose to suggests. Thatcher suffered some major defeats in cabinet. The ignore those who favoured a lightning strike against union power and response of the Treasury team which contained some of the Prime the public sector. Instead the Government was soon locked in a Minister's staunches! supporters was to push through a second lengthy war of position for which many ministers clearly had no deflationary budget in 1981 in order to maintain their financial stomach. In its first two years the only part of the Government's strategy intact. The detail of budgets are not discussed in cabinets so strategy which was reasonably successful was the financial strategy for the opponents of the monetarists had either to acquiesce or to resign. reducing inflation. Everything else was sacrificed to it. The pursuit of They did not resign, partly no doubt because they must have believed fixed monetary targets necessitated repeated deflation of the their position to have been strengthening all the time. In the months economy, so intensifying the recession. Mass unemployment helped following the budget unemployment reached almost three million on the Government to outflank the unions. It reduced militancy over pay the official register alone, industrial output, having dropped 17% in and allowed managements in many industries to change working two years, showed signs of ceasing to fall further, but the prospects of conditions and drastically reduce manning levels. But these gains a sustained recovery looked small, while inflation was still in double were not matched by corresponding progress on improving the figures — higher than the level the Government had inherited. In July conditions for future capital accumulation. For the social market at the Warrington by-election the Conservative share of the vote strategy the pursuit of monetarist policies to control inflation needed dropped by a record amount, and the cities erupted in the worst riots to be backed by a massive roll back of the state to restore the role of the seen in mainland Britain since the war. market throughout the economy, both to increase efficiency and to There was therefore a general expectation that some moderation in make it possible for direct taxation to be substantially reduced. the Government's stance was inevitable. Yet it had been supposed Similarly trade union law reform was regarded as necessary to make that after the cabinet reverses she had suffered at the end of 1980 the gains won by high unemployment permanent by weakening trade over public expenditure, Thatcher would be forced into a softening union power and preventing the re-emergence of militancy once of her policies in 1981. It would not be called a U turn but it would economic recovery began. involve making the reduction of unemployment rather than the Marxism Today November 1981 7 control of inflation the central focus of the government's efforts. Thatcher, however, had other ideas. Her appointment of a prominent something clearly snapped inside Mrs monetarist, Alan Walters, as her special adviser was a sign that she did not wish to hear alternative advice. The budget with its massive Thatcher's head. She has moved increases in taxation to reduce the level of government borrowing resolutely to silence her critics confirmed this. recruits will inject a new ideological sharpness into cabinet Expectation of moderation discussions. With their rise and the promotion of Fowler and Young The budget made the critics of her policies become more outspoken. the group in Cabinet strongly committed to Thatcher's economic Ian Gilmour and Peter Walker made major speeches critical of the policies has risen to eleven. Of the eleven remaining members of the deflationary bias of government policy. The Treasury ministers were cabinet the wets have been reduced to two — Jim Prior and Peter not abashed. They calculated that in order to fulfil the Government's Walker, and Prior has been sidelined. The other significant group in pledges to cut taxes before the end of the Parliament, new cuts in Cabinet which has given the wets intermittent support is the old Tory public expenditure of more than £5 billion would be necessary. The establishment. It includes Whitelaw, Hailsham, Pym, Carrington, Treasury produced a paper outlining the need for cuts of that Atkin, and (less certainly) Heseltine and Jenkin. Thatcher has magnitude for the financial year 1982/83. It was discussed in cabinet not moved against this group. Only Thorneycroft who did not have a on July 23. This was only two weeks after the riots, one week after seat in the cabinet has been axed, in favour of a Thatcherite, Cecil Warrington, and the response in cabinet was very hostile. Only Parkinson. The outcome is that Thatcher now has a cabinet more Thatcher, Brittan, Joseph, and Fowler supported Howe. Lord loyal, as well as sounder ideologically, than at any previous time. Carrington was reported as saying: 'I went through this last year and I went through it the year before and I'm not going through it all again.' Still divided Ten days later at the weekend following the end of the Yet although she may suffer fewer reverses in cabinet it is still a parliamentary session two of the most senior figures in the party, divided cabinet. Most of the senior figures in the party either do not Thorney croft, the party chairman, and Pym, the Leader of the House share or actively mistrust the strategy on which she has embarked and of Commons, delivered speeches which explicitly attacked the the doctrines in which she believes. The critics she has removed are Chancellor's confident assertions that the recession was over and the the least substantial politically. Those who have most obstructed her recovery had begun. Thorneycroft announced that very few of his in the past two and a half years — Prior, Walker, Pym, Carrington, friends in industry or the City believed the recession was over, and he and Jenkin — are all still in place. So despite the reshuffle the advised Thatcher to avoid a reshuffle and plan a boost to the divisions will persist. Thatcher has managed to sideline the critics and economy. Francis Pym declared: 'The British people will not in my the sceptics. The conduct of economic policy has been entrusted judgement be prepared to tolerate the worst effects of recession if almost exclusively to those who have displayed monetarist zeal. But there is not a clear sign that the sacrifice will have been worthwhile.' she has not yet broken free from the old Tory leadership. She is still an intruder and she is still on trial — she would struggle to survive as Hardline reshuffle Leader if the party loses the next election, so would many of her With Prior subsequently threatening publicly to resign rather than be acolytes. But if the Conservatives won the next election under her moved from the Department of Employment, and with Heath leadership, then the transformation of the party which she has begun preparing to launch a new campaign against the course on which the could be completed. The struggle being waged in the Conservative Government was embarked, something clearly snapped inside Mrs Party is far less public, far less apparent than the struggle in the Thatcher's head. She has moved resolutely to silence her critics, Labour Party, but it is no less important, and many Conservatives reinforce support for her policy within the Cabinet and clear the way must now fear that Thatcherism is no passing aberration but has come not for a retreat but for the full implementation of the social market to dominate and permanently reshape the party. If these fears are strategy. With the earlier dismissal of St John Stevas she has now realised then the defections to the Social Democrats, which have removed from the cabinet four of her critics. In addition Prior has already begun on a modest scale, will grow. been sent away to Northern Ireland, while Tebbitt and Lawson have been promoted to Employment and Energy, and Ridley and Bruce- Gardyne to the Treasury. In the four main spending departments she THE TORY OPPOSITION now has Joseph (and Boyson) at Education; Fowler at Social Services; Before the reshuffle it still seemed likely that her instinct for self- Nott at Defence; and Jenkin at Industry. Of these only Jenkin is not a preservation would eventually lead Thatcher to trim her policies and Thatcherite. At the centre of the government the Treasury team now make concessions to her critics, and that she would be forced to bristles even more with hardline monetarists — Howe (Chancellor), become less of a conviction politician and more of a broker. She has Brittan (Financial Secretary), Ridley (Economic Secretary) and Jock now discarded that option and demonstrated that whatever her Bruce-Gardyne (Minister of State). Ridley was notorious in caution in the past her fundamental allegiance remains to her Opposition for preparing a secret report which listed which unions the ideological principles rather than to the unity or the electoral survival Government should fight and which it should avoid, while Bruce- of the Conservative Party. Gardyne is one of the more prolific writers for the Centre for Policy One unusual feature of the last two years has been that the main Studies, and has been working as a leader writer for the Daily opposition to Thatcher's leadership has been within the cabinet itself. Telegraph. Meanwhile John Biffen remains at the Board of Trade and The opposition has come primarily not from MPs or the constituency now Tebbitt is at Employment. With the exception of Jenkin at parties but from her own ministers. The Conservative Party has Industry it is an extraordinary concentration of the leading advocates certainly become less easy to lead during the last twenty years and of monetarism and the social market strategy within the party. Heath's ten years as Leader were notable for the internal ferment The elevation of Lawson and Tebbitt is particularly significant amongst activists and numerous revolts among Conservative MPs. because both are hardline Thatcherites well versed in the doctrines But the cabinet itself remained remarkably unified behind his and objectives of the New Right. Unlike Howe and Brittan these leadership in part because he took trouble to exclude all those who 8 November 1981 Marxism Today

questioned his leadership or his policies. Thatcher's internal problem is rather different. The loyalty of the constituency parties though under strain has not cracked yet; the support of the Conservative media, the Daily Mail, the Daily Express, and the Daily Telegraph, remains ferocious even if the Sun appears to be defecting (Shirley Williams has now been given a regular column); and the MPs who voted Thatcher into the Leadership have begun to grumble but are still mostly loyal. But her cabinet has been deeply divided, one sure sign of which has been that the details of its discussions have been leaked at every available opportunity. In an interview shortly after she became Prime Minister Thatcher insisted that the cabinet must be united behind her because she could not waste time having internal arguments. But the history of her leadership and still more of her cabinet has been one long protracted internal argument. The effects of this have been considerable. It has meant that the Thatcher experiment has been pursued much less singlemindedly than Thatcher wanted. The Prime Minister has an instinctive desire to bulldoze opposition. 'Don't be so wet' was at one time her habitual response to criticism. But far from intimidating her colleagues many of them were quite happy to adopt the insult as a label and parade it. At least if you were known as a wet you could not be held responsible for the unfolding economic catastrophe which the Treasury ministers were designing with such careless satisfaction.

A divided cabinet It is not exactly a secret that the cabinet is only occasionally the decision-making centre of the Government — there is often little discussion of policy and it exists mainly to rubber stamp decisions arrived at elsewhere. The notion that cabinet ministers are collectively responsible for cabinet decisions is only true in a formal sense. Indeed there have been several important occasions since the war when the cabinet was never even informed of major government decisions. But the cabinet retains a symbolic importance, and does at times assert itself, so it is a measure of Thatcher's relative weakness in the party that she felt obliged in May 1979 to appoint not the cabinet she would have liked, but a cabinet the majority of whose members were opposed to one of the central features of Thatcherism—the economic strategy. Thatcher attempted to minimise the problem by appointing all her supporters who showed the slightest sign of administrative competence to the key economic ministries, while giving to her critics and potential rivals the major spending ministries or prestigious departments like the Home Office and the Foreign Office. So in the last two years we have had the spectacle of a Conservative government embarking on what many commentators have regarded as the most radical experiment since the war, in the midst of the most severe world recession since the 1930s, with its top leadership extremely divided over the right policies to pursue. This division goes back to the circumstances of Margaret Thatcher's election as leader. If Heath had retired gracefully after the second election defeat in 1974, it is highly unlikely that someone so inexperienced and untried as Margaret Thatcher would have won against candidates like Whitelaw or Prior. But because these candidates were unable to stand against Heath, Thatcher was able to win on the first ballot securing the votes of all those who were dissatisfied with Heath's leadership and wanted a change. Defeating the incumbent Leader bestowed on Thatcher an authority and on her campaign a momentum which no other candidate could counter in the short time available before the second ballot. But although Thatcher won, only two members of the shadow cabinet voted for her. Rather like Alec Douglas-Home before her, although to an even greater extent, she became Leader against the wishes of a majority of the established party leaders. If she had owed her elevation to some great popular upsurge she might have swept the old Tory establishment aside. But her reputation and skill as a Marxism Today November 1981 9

populist were developed afterwards in carefully orchestrated candidates. Is the present turmoil in the leadership simply about campaigns fostered by the Conservative media and the party's public personalities? Certainly many Tories have a deep dislike for Margaret relations advisers. Because she became leader in an entirely orthodox Thatcher, partly because of her personality, partly because they think way she was not in a position to conduct a sweeping purge of the party. her abilities second rate, whatever her own estimate of them may be. Some of the ministers most closely associated with Heath were But although there undoubtedly are personal rivalries, the divisions dropped from the shadow cabinet. Some of Heath's most loyal go much deeper than personalities. This is because Thatcher is not lieutenants in Central Office went as well. But the shadow cabinet she just another ambitious politician but the standard bearer for the New appointed was remarkably similar to the one she inherited. Places Right. Thatcherism will prove more durable than Thatcher herself were found for most of the leading figures who had enjoyed because it is far more than her own creation. It is a major political preferment under Heath. strategy, similar in certain respects to the alternative economic strategy, a field of debate organised around a coherent set of Growing fears assumptions and perspectives which in turn define issues, furnish This was one of the contradictions in Thatcherism from the outset. objectives, and suggest tactics. Key groups of intellectuals have Having ousted Heath, Thatcher at first behaved extremely cautiously contributed to its articulation and major interests have given it so as to reassure the party's establishment and create a unified party. support. The argument which has raged within the cabinet these past But also from the outset Thatcher made it clear that she was two years and will continue to rage is an argument over whether this is committed to conviction politics. She lacked the skill or temperament an appropriate strategy for the Conservatives to be following. This is a to be a broker and fixer. She was determined to launch a new policy separate question from whether this Government is actually and see it through. Her problem was that she was entrusting its succeeding in implementing it or not. In recent years it has been execution to a group of ministers a majority of whom did not believe in possible to witness that rare sight in the Conservative Party — an it. Behind them stood the civil service with its own perspectives and argument about doctrine and policy. special talents for obstruction. For their pan the Tory wets undoubtedly underestimated their Conflict over policy adversary. Many of them thought that Thatcherism as it emerged The debate about doctrine is a rather strange affair because the after 1975 was the kind of ideological spasm which parties in opposition are always prone to. They expected that it would rapidly At least if you were known as a wet disappear once the Conservatives re-entered office. They did not anticipate the tenacity with which the Prime Minister would cling to you could not be held responsible for the essentials of the strategy and close her mind to criticism. Few of the unfolding economic catastrophe. them can have imagined that monetarism would prove far more than a six month wonder, or that a Tory Chancellor having seen doctrine on one side is that doctrine has no place within the unemployment double and output plunge would introduce a severely Conservative Party. The task of the Conservative Party according to deflationary budget in order to keep within rigid money supply and Sir Ian Gilmour in his influential book Inside Right is not to be an borrowing targets. ideological party but to be a governing party and to be as free of There is no doubt that the Tory establishment has become seriously doctrine as possible so as to be flexible and pragmatic in dealing with alarmed. Apart from the public disquiet of Pym, Thorneycroft, the actual circumstances governments encounter. Economic Walker, Gilmour, St John Stevas, and Rippon, there have been strong liberalism he thinks as dangerous a doctrine as socialism and quite words from two former Conservative Prime Ministers. Harold alien to true Conservatism, and he spends many pages attacking Macmillan has had no difficulty in recognising in Thatcherism the Thatcher and Joseph by attacking Hayek and Powell. Whatever the rebirth of the deflationary strategy against which he campaigned so merits of the dispute about 'true Conservatism' (and there is much strenuously in the 1930s. In similar style Edward Heath has that can be said on both sides), its substance concerns the policies of repeatedly warned that the party risks becoming identified electorally postwar Conservative governments. The ending of the era of mass as the party of unemployment once more. Many Conservatives have unemployment, the establishment of the managed economy and begun to fear that Thatcher is leading them to an electoral welfare state, the permanent enlargement of the public sector, did catastrophe. She seems to have the same qualities that Macmillan once permit what appeared at the time as a far reaching accommodation discerned in de Gaulle — all the rigidity of a poker without its between organised labour and the state. The Conservative leadership occasional warmth. In this atmosphere speculation about coups proved quite ready to govern within the constraints of social becomes rife and many Tories recall wistfully that their party is democracy rather than seek to overturn them. But the failure of supposed to be renowned for the ruthlessness and efficiency with successive governments after 1960 to arrest decline has created on which it disposes of its leaders. They rarely fall under buses (few of both Right and Left strong opposition to the postwar record of all them have ever travelled on one) but they do often contract disabling governments. Thatcherism proposed a full scale assault on the diseases. essentials of the consensus, particularly the power of organised labour and the size of public expenditure. It is this attack which the 'wets' have tried to resist. THATCHERISM AND THE ALTERNATIVES The doctrinal divisions in the party are increasingly public. But is Thatcher, however, will not be easy to dislodge. To see why, it is there any alternative to the present policies which the Government is necessary to probe a little deeper and examine the significance of the pursuing? The wets have obstructed government policy chiefly on two emergence of the Tory 'wets' for the Conservative Party and for issues — cuts in public expenditure and reform of trade union law. British politics. There have been divisions in the Conservative They have been forced to acquiesce in the general financial strategy leadership before. The scenes at Blackpool in 1963 after Macmillan because of the absence of any cabinet control over the budget. But the resigned were certainly memorable and in the best traditions of monetarist financial policy is only part of the wider social market seaside entertainment, but no one suggested that there were strategy which is a coherent response to the central political problem important differences of ideology or policy between the numerous of Britain's relative economic decline, recommending policies that 10 November 1981 Marxism Today

restore the essentials of a capitalist economy — a state that is strong for a few more years but cannot halt it. What the 'wets' need is a enough to maintain free markets but which is restricted in its detailed coherent strategy of state intervention aimed at remedying the functions to the provision of sound money and the enforcement of deficiencies of the private sector, but it is very hard for them to law. articulate one. The private/public divide is so deeply entrenched in the dominant ideology and in the party system. The only major Weakness of the wets Conservative figure who has begun to elaborate such a strategy is Peter The fundamental weakness of the wets' position has been their Walker, but for the moment he is very isolated within the inability to construct a convincing alternative. What options do exist Government. for those who wish to preserve the rule of capital in Britain? Since they have to acknowledge the failure of the various attempts to modernise THE IMPACT OF THE SDP the British economy over the last twenty years it is hard for Conservative critics of monetarism to reject the logic of the What the reshuffle has shown is that Thatcher is determined to wager Thatcherite case. They do not dissent from many of the central everything on the success of her strategy. If her judgement proves objectives of the social market strategy. Who amongst the wets would correct, the economy will recover in 1982, inflation will be reduced to not welcome a substantial reduction in the power and privileges of the single figures, interest rates will fall, and public expenditure cuts and trade unions? Who would not like to see substantial cuts in taxation North Sea oil revenues will permit significant tax reductions in the and public expenditure? Who does not wish to halt inflation? The 1983 budget. In those circumstances, notwithstanding the high argument turns not on objectives but on means. What the wets fear is numbers that would be out of work, Thatcher might yet persuade that the adherents of the social market strategy are blind to its social enough of the working class electorate who voted Conservative in 1979 and political consequences. They fear it will unleash class war and and have become disaffected, to vote Conservative again. But there is divide the nation. They fear it could make the country ungovernable small comfort in this for her critics. For they know that if she won a further victory her position would become impregnable and she would move to refashion the party still further in her own image. What seems incredible is that There is a special flavour about Thatcherite Conservatism. To Thatcher should be preparing for experience it you need to read the Daily Mail and the Daily Express. these battles now, instead of The way they reported the reshuffle was instructive. They gloated over the dismissal of Soames and Gilmour and the humiliation of precipitating them at the onset Prior. Soames, Gilmour, and Thorneycroft were dismissed as 'grandees' and contrasted unfavourably with Norman Tebbitt, Nigel and precipitate a confrontation which the Conservative Party might Lawson, and Cecil Parkinson. Tebbitt was praised for his 'classless' not win. They believe, particularly after the events of the last speech, Parkinson was admired because he is self-made and was Conservative government, that the country cannot be governed educated at a grammar school. These Conservatives are without taking account of the interests of organised labour. Their representatives of the more meritocratic populist right wing Toryism stance is cautious and pragmatic but that is why they find it so hard to which Thatcher is attempting to promote. What differentiates them differentiate their position from the policies attempted over the past from many of the older leaders of the party is their implacable hostility twenty years by both Labour and Conservative governments. The to the labour movement. New Right, however, thinks that the time for the appeasement of What the opponents of Thatcher know after this reshuffle is that union power is over. Only by taking on the core of social democracy— only her removal will now change the essentials of her policy. Every the organised power of labour and the collective welfare services — victory the wets have won in the past two years she is now in a can the British economy be restored to health. This means taking risks position to nullify. Many of her critics undoubtedly thought that with and enduring a period of austerity and unpopularity. Margaret the mounting cost of the economic policy and the warning signs of the Thatcher is wholly persuaded by this analysis and she is steadily riots the time for a modification of the strategy had come. It would making it clear that there is no place in the Conservative Party for have been very easy for Thatcher to acquiesce in this change of those who do not share it. direction. It would have been well received by most of the media, and What alarms the wets most is the relentless rise in unemployment would have been interpreted as a prudent response to the evident and the indifference the monetarists display towards it. But what do failures of monetarism and the rise of the SDP. the wets themselves propose? What conceivable set of measures — reflation, subsidies, incomes policy — can significantly reduce The SDP threat unemployment given the advanced state of decay of large sectors of The old Tory establishment must know now if it did not know before British industry and the unwillingness of private companies to invest that it faces ultimate liquidation at Thatcher's hands if she stays as in Britain at a level that makes a significant impact on unemployment Leader. She will drive the moderate wing out of the party. The senior levels? Econometric models suggest that the only technical policy that leaders will gradually retire and loyal Thatcherites will move in. Most is likely to have any impact on unemployment is import controls. of the Tory establishment may still believe this cannot happen. They Conventional reflation would have to be massive and would almost also believed that Thatcher could never become Leader. They think certainly cause a rapid acceleration of inflation. Import controls are an as Sir Ian Gilmour said so bluntly, that she is heading straight for the option for any government in an emergency, but the 'wets' are rocks, and that the next general election is practically lost already. unwilling to support them as a priority because many of them are Into this bleak Tory landscape shines the SDP. Although many strong supporters of the EEC. Labour politicians still pretend otherwise the SDP is already well on The political problem of Thatcher's critics is that the policy options the way to becoming a major force in British politics. At the very least are extraordinarily limited. The hundred years decline has boxed its impact at the next general election is likely to deny the Labour Britain in—it is now one of the weaker capitalist economies with little Party a working majority, and it is possible that its impact may be influence over the world economy but ever more heavily dependent on much greater — either winning outright victory or pushing one of the it. A policy of pragmatic muddling through may cushion the descent two major parties into third place. The British party system is ripe for Marxism Today November 1981 11

overthrow; the importance of grass roots organisation is dwindling and the allegiance of the electorate to the two major parties has fallen away. The SDP possesses inestimable advantages — no policies, no record of failure, and no identification with either trade unions or private capital, and it is assured of substantial media support. The Tory wets must view the rise of the SDP with great misgiving. For the SDP not only lifts the fear of the socialist objectives of the Labour Party which since 1918 have been such a powerful cementing force for the Conservative Party. It threatens to become the new pragmatic governing party of the Centre. The wets realise that since they have failed to dislodge Thatcher, or to persuade her to moderate her policies, the Conservative Party is appreciably nearer a decisive turning point in its long history. The stakes are high. Either a victorious Thatcher shifts British politics permanently to the Right or the Conservative Party is dashed to pieces in a great electoral catastrophe, and following the introduction of proportional representation never forms a majority government on its own again. The opponents of Thatcher face a cruel dilemma. Most of them support PR, because of the danger they see in the leftward movement of the Labour Party. But most of them recognise that PR will benefit the SDP more than it will the Conservatives. Yet few Tories are ready to join the SDP. They still regard the Conservative Party as rightfully theirs. The web of loyalties and habit is very strong and hard to break. As the Tory wets see it the only way to stop the SDP is to recapture control of their party and restore its traditional approach. Following the reshuffle this looks far away now. The Right is well entrenched. That is why speculation has already begun as to what would happen if the next election fails to give a majority to any party. The stage would be set for the formation of a National government and who can doubt that many leading Conservatives — Heath and Gilmour, possibly Walker and Prior would not be ready to join? So might some Labour MPs. Such a government would complete the realignment of British politics which the SDP has begun.

The gloves are off For the Left the reshuffle may signal a decisive moment. The gloves are off now. Thatcher has shown herself determined to remain free to pursue her policies to the end, and has cleared the way for real cuts in overall public expenditure and real changes in trade union law. So it is possible though by no means certain that major battles now lie ahead. What seems incredible is that Thatcher should be preparing for these now, halfway through her term, instead of precipitating them at the outset. If it should be that the war of position which has been going on in the last two years is ending, then a war of movement may just be about to begin. The 4% pay limit for the public sector may turn out to be the first sign of it. The extent of the cuts in public expenditure which are announced this autumn and the content of the new anti- union legislation which Tebbitt will introduce will indicate whether the Government really has moved over to the offensive. In wars of movement nothing is fixed any longer. Everything is placed in jeopardy. This brings great dangers but also great opportunities. Too much, however, should not be read into the reshuffle. It has certainly weakened one of the obstacles to the implementation of the social market strategy. But there are many others. There is no certainty what the Government will do if the recovery on which it has pinned all its hopes does not materialise and the fall in the stock market signals the onset of a new recession, or if it suffers some major electoral reverses or industrial defeats. Even hardline monetarists can start suffering from Lord Thorneycroft's complaint — rising damp — in the face of financial collapse, social unrest, industrial militancy and approaching elections. The political will of Thatcher's new cabinet will be severely tested in the next twelve months.